Rural India: Adapting to evolving consumer trends for business success

Authored by Mukul Kumar, Founder, Gloworld Energy Pvt Ltd.

The Indian market is not a homogeneous whole, but a vast and complex mosaic of classifications. Within this, the rural segment, comprising over 68% of the nation's population, continues to transform at an astonishing pace. The key to unlocking this potential lies in understanding the evolving needs of the rural consumer and strategically adapting and aligning with the rapidly changing landscape of rural consumer behaviour.

Changing Rural Consumer Trends

The metamorphosis of rural consumers from traditional, price-sensitive entities to more aspirational and discerning customers is palpable. This evolution is propelled by an amalgamation of factors, notably the surge in rural incomes, improved access to infrastructure, and elevated education levels. With rising prosperity and exposure to media and technology, rural consumers now demand not just products, but experiences; not just services, but solutions tailored to their evolving aspirations.

CRISIL Research predicts a compound annual growth rate (CAGR) of 10.4% in rural consumption between 2022 and 2027, outpacing the 8.2% growth expected in urban areas. By 2027, the rural market is poised to constitute a substantial 46% of India's total consumption, according to the same source.

Impact of Rural Consumer Trends on Businesses

Businesses operating in rural India are experiencing a seismic shift in consumer expectations, necessitating strategic recalibration. In the retail sector, a proliferation of smaller-format stores tailored to local needs is witnessed. Moreover, retailers are diversifying their offerings, incorporating branded goods and financial services into their portfolios.

Kitchen and home appliance companies, especially the solar-energy based ones, are meticulously crafting consumer durables suited to the specific needs of rural consumers. These enterprises are not only adapting their product lines but also revolutionizing distribution channels through initiatives like mobile vans and direct-to-home sales. Telecom companies, recognizing the potential of rural markets, are expanding network coverage, providing affordable mobile data plans, and innovating applications tailored to rural needs, such as weather updates and agricultural information services.

The statistics reinforce these observations: According to a recent Nielsen report, rural households in India are expected to spend more than their urban counterparts on discretionary items in the coming years. The report found that rural spending on consumer durables is expected to grow by 15% annually.  Furthermore, the rural e-commerce landscape is on the ascent, with online sales projected to reach $8.7 billion by 2025, as indicated by Mordor Intelligence.

The Solar Revolution in Rural Consumption

An illustrative example of this transformative trend is the burgeoning consumption of solar products in rural areas. The shift towards sustainable energy solutions has prompted rural consumers to embrace solar lights and, more broadly, solar-based appliances. This paradigm shift has compelled solar product manufacturing and procuring companies to realign their strategies.

In response to the growing demand, these companies are diversifying their product portfolios, introducing a whole array of solar-based kitchen, home and small business appliances tailored to the specific needs of rural consumers. From the traditional solar-powered cookstoves and water heaters, businesses are producing new solutions such as solar powered chillers, dryers, RO water filters, etc to cater to the unique energy requirements of rural areas. This strategic shift not only aligns with the broader trend of consumer-centric adaptation but also contributes to the sustainable development of rural communities.

The Beginning of Revolutionized Rural Market

In the labyrinthine marketplace that is rural India, businesses must navigate with finesse, adapting strategies to align with the shifting sands of consumer behaviour. The future belongs to those who embrace a customer-centric ethos, crafting innovative products and services that resonate with the nuanced preferences of rural consumers.

"The Rise of Rural Consumerism in India" by KPMG (2023) found that rural consumers are increasingly aspirational and are willing to spend on consumer goods and services. The report found that rural consumers are particularly interested in products and services that can improve their quality of life, such as education, healthcare, and financial services. Furthermore, another report titled "Unleashing India's Rural Economy: The Rise of Rural Centric Businesses" by the Confederation of Indian Industry (CII) and McKinsey Global Institute (MGI) (2023) found that rural India is a market with immense potential for businesses. The report estimates that rural India will account for nearly 40% of India's GDP by 2030.These statistics and data presented offer a compelling narrative, underscoring the imperative for businesses to pivot towards a rural-centric approach. As CRISIL Research predicts the dominance of rural consumption and the burgeoning adoption of e-commerce, it is evident that businesses ignoring the rural metamorphosis do so at their peril.